Debt cancellation ensures equality in society

Associate Professor Nguyen Viet Loi, Director of the Financial Strategy and Policy Institute.

However, how to ensure the fairness, transparency and to create the consensus of the new business community is worth discussing. The Customs Newspaper reporter had a talk with Associate Professor Nguyen Viet Loi (photo), Director of the Financial Strategy and Policy Institute.

Statistics of the Ministry of Finance show that, by December 31, 2017, the total amount of tax arrears, late payments and fines of irrecoverable tax arrears that are due to objective causes, and managed by the Taxes and Customs authorities, was about 35,347 billion VND. Why has this tax debt not been handled, Sir?

According to Article 65 of the current Law on Tax Administration, tax and fine arrears may be remitted in three cases:

Firstly, the bankrupt company has made payments under the law of bankruptcy without any property to pay taxes and fines.

Secondly, individuals have died, missing or lost their civil act capacity and who have no property to pay tax and fine arrears;

Thirdly, for tax arrears, late payments and taxpayers’ fines that are not in the above cases, the tax administration agencies have applied all measures to enforce tax administrative decisions and the tax arrears, late payments, fines for over ten years from the date of tax payment deadline cannot be recovered, and the Clause 3, Article 2 of Tax Management Law 21/2012/QH12 regulates: For irrecoverable tax and debt arrears arising before July 1, 2007, assign to the Government to cancel the debt and report some cases to the National Assembly.

In fact, it is found that the scope of tax debt cancellation in the Article 65 and for some subjects who suffer from the objectively difficult situation in Article 2 of Law on Tax Management No. 21/2012/QH12 mentioned above, is quite narrow and does not reflect the reality of bad debts, which are difficult to recover, especially the outstanding debts incurred over a long period, including many cases of tax debts that have arisen due to objective reasons of market fluctuation and economic crisis.

The Ministry of Finance has just consulted in the draft resolution of the National Assembly on the handling of tax debt, late payment, irrecoverable penalty. Accordingly, the tax debt cancellation is estimated to be up to 26,500 billion VND. Is this reasonable, Sir?

In the difficult economic context, many taxpayers have made great efforts to pay the tax arrears but they are unlikely to pay fines for delays, especially in the case of enterprises experiencing unforeseen difficulties. Now, there are cases where fines are higher than the tax amount. If there is no solution and proper handling mechanism, the amount of irrecoverable tax debt and fines will rise and increase pressure on taxpayers and tax authorities.

Therefore, in order to completely resolve existing debts, and to successfully implement the national strategy of restructuring SOEs as well as to remove difficulties for enterprises, the cancellation of tax debt for some cases is absolutely necessary.

Dealing with debt, defining irrecoverable tax arrears, late payments, fines only apply to a number of specific cases. Photo: Thuy Linh.

In point of view that all economic sectors are equal in terms of paying taxes, so the cancellation of debt can cause inequality, setting a bad precedent. What do you think about this issue?

It should be stressed the handling of irrecoverable debt, tax arrears, late payments, fines for a certain number of specific cases including: cancellation of tax arrears for enterprises providing goods and services paid by state budget capital or having state budget sources but have not been paid yet; fines for late tax payment and late payment of tax arrears arising before January 1, 2018 of taxpayers who have encountered natural disasters, fires, unexpected accidents or unforeseen circumstances with the level of cancellation not exceeding the value of the damage; cancellation of irrecoverable tax arrears, late payments and fines due to taxpayers actually has dissolved (except for cases of dissolution for splitting, merger or transformation); bankruptcy or production and business activity termination, no longer operating production and business before January 1, 2017 but unable to pay the budget and have been revoked business registration certificate…).

Thus, it can be seen that the subjects of handling debts, tax arrears are mainly loss-making enterprises which have quit the business, dissolved, went bankrupt, no longer in the place of residence registered for tax payment, no longer operating production and business or have encountered natural disasters, fires... In terms of capacity and capability, these enterprises are no longer or have not been able to compete with other operating enterprises. Therefore, the cancellation of debts and tax debts for certain subjects still ensures equality in society.

What should the Ministry of Finance do to define and eliminate debts to the right subjects, create a consensus from the public opinion, Sir?

To define and eliminate debts to the right subjects and ensure equality and contribute to removing difficulties for enterprises, the Ministry of Finance as well as concerned ministries and branches need to review and manage well the subjects of debt cancellation through inspection and supervision to minimize risks, avoid situations where the beneficiaries take advantage of the opportunity to cause loss of state revenue.

In order to ensure strict compliance with the debt cancellation, if the founder of the enterprise or the legal representative of the organization continues to register for the establishment of another business organization, the Ministry of Finance and other relevant ministries should propose sanctions for two years from the date of debt cancellation. The owner of the enterprise, the founder of the enterprise, the representative are not allowed to set up a new business, excepting for cases where taxpayers fully pay the tax amount under the debt cancellation decisions into the state budget.

In particular, measures to manage tax debts should be strengthened. Take resolute measures to collect debts and enforce tax debts such as the issuance of debt notification and late payment, issuance of decisions on enforcement of tax debts for cases of compulsory tax debts, together with the close coordination of the State Treasury, commercial banks and credit institutions in coercion of tax debts; coordinate with other departments and branches to recover tax debts to ensure the confidence of the people in the State management over taxation.

Thank you, Sir!